Gould v. Ocwen Loan Servicing, LLC CA2/3

Filed 1/21/21 Gould v. Ocwen Loan Servicing, LLC CA2/3
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not
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been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION THREE
PATRICIA A. GOULD, B303876
Plaintiff and Appellant, (Los Angeles County
Super. Ct.
v. No. 18BBCV00133)
OCWEN LOAN SERVICING, LLC,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of Los
Angeles County, John J. Kralik, Judge. Reversed with directions.
Law Office of John V. Gaule and John V. Gaule for Plaintiff
and Appellant.
Severson & Werson, Jan T. Chilton and Kerry W. Franich for
Defendant and Respondent.
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Patricia A. Gould appeals from a judgment entered after the
trial court sustained Ocwen Loan Servicing, LLC’s (hereafter
Ocwen) demurrer to her first amended complaint without leave to
amend. We reverse with instructions.
BACKGROUND
I. The foreclosure
Because this appeal comes to us after the trial court sustained
a demurrer without leave to amend, we recite the facts as alleged in
the first amended complaint and those matters of which judicial
notice has been taken.
Patricia Gould1 obtained a loan secured by a deed of trust
encumbering her home. Ocwen serviced Patricia’s loan.
In March 2016, Patricia defaulted on her loan payments and
the trustee recorded a notice of default.2 To avoid foreclosure, John
contacted Ocwen, who told him that Patricia should be able to
qualify for a trial loan program without submitting any loan
documents if she sent a certified check for two monthly payments.
Patricia sent Ocwen a certified check but two weeks later, Patricia
was reimbursed for the same amount. Ocwen said it was too late to
enter the trial loan program and that Patricia would need to submit
a full loan modification application. Patricia submitted the full loan
application along with three current paystubs and a utility bill.
1 The
original complaint also named John Gould as a plaintiff
and the first amended complaint alleged that he witnessed various
events. We refer to John Gould and Patricia Gould by their first
names, meaning no disrespect.
2 Western Progressive, LLC was the trustee under the deed of
trust.
2
A few weeks later, Ocwen rejected the loan application
because of a discrepancy in the paystubs. Patricia explained the
discrepancy and then emailed additional copies of her paystubs as
well as a letter stating her financial hardship. Ocwen informed
Patricia that if her loan application was not approved, she could pay
half of the amount due, approximately $30,000, and the rest could
be paid off over two years on top of the existing loan payment.
Patricia did not have that amount, so this option was unavailable.
As a foreclosure sale in July 2016 was approaching, John
contacted Ocwen again. Ocwen stated that if the loan application
were in process, the sale date would be postponed, but that any
payments toward the mortgage would have to be the total amount
in arrears. This option was also unavailable to Patricia. The
trustee recorded a notice of trustee’s sale in September 2016 after
Patricia did not cure the default.
Another foreclosure sale date was scheduled in late December
2016. When John contacted Ocwen again, it informed him that
Patricia’s loan application was out-of-date, and that she needed to
submit a new loan application with current paystubs. Patricia sent
the new loan application along with her current paystubs and
utility bill. The foreclosure date was postponed until February 8,
2017. On February 7, 2017, John called Ocwen and spoke with a
representative, who stated the foreclosure sale date was
February 9, 2017 and reiterated that, if the loan application were
current and in process, the sale date would be postponed. Ocwen
also stated that it needed additional paystubs to keep Patricia’s
account current. Patricia sent her latest paystub and, later that
day, John spoke with another Ocwen representative who reiterated
that the foreclosure sale date was February 9, 2017 and that as long
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as the loan application was current, the sale date would be
postponed.
The next day, on February 8, 2017, the trustee sold the
property at a foreclosure sale.3 The purchaser filed an unlawful
detainer complaint against Patricia and obtained a default
judgment against her in March 2017. Patricia discovered her house
had been sold when law enforcement came to the house and evicted
her in April 2017.
II. Patricia sues Ocwen
The Goulds sued Ocwen for illegally foreclosing on Patricia’s
home, alleging causes of action for breach of contract, breach of
fiduciary duty, negligence, and fraud.4 Ocwen demurred on the
basis that John was not a real party in interest because he was not
a party to the loan and that the complaint failed to allege sufficient
facts to state a cause of action. The trial court sustained the
demurrer, finding that the Goulds’ breach of contract cause of
action did not allege a clear agreement between the parties and that
any alleged oral agreement was unenforceable under the statute of
frauds. The trial court also found that the Goulds failed to allege a
fiduciary relationship or that Ocwen owed the Goulds a duty of care
in handling the loan modification process. With respect to the fraud
3 Third party LJK Investment LLC purchased the property at
the foreclosure sale.
4 Inher initial pleading, Patricia named Ocwen, Ocwen
Financial Corporation; and Ocwen Mortgage Servicing, LLC as
defendants. Patricia voluntarily dismissed Ocwen Financial
Corporation and Ocwen Mortgage Servicing, LLC, leaving Ocwen as
the only defendant in her first amended complaint.
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allegation, the trial court found that it was not pled with sufficient
specificity.
Patricia filed a first amended complaint alleging causes of
action for unfair and deceptive trade practices under the Consumer
Financial Protection Act of 2010 (12 U.S.C. § 5481 et seq.), breach of
fiduciary duty, constructive fraud, breach of implied-in-fact
contract, and negligence. The first amended complaint omitted
John as a plaintiff, but otherwise, the factual allegations were
nearly identical to those in the original complaint. Ocwen
demurred again.5 Patricia filed a five-page opposition that did not
address the merits of the demurrer. The trial court sustained the
demurrer without leave to amend.
DISCUSSION
Patricia argues that the trial court abused its discretion in
denying her leave to amend her first amended complaint. In her
opening brief, Patricia does not identify how the trial court abused
its discretion or any potential amendments that could save her
complaint. In her reply, however, she asserts for the first time that
she can amend her complaint to state causes of action for
negligence, misrepresentation, and violation of the California
Homeowner’s Bill of Rights (HBOR) (Civ. Code, §§ 2923.6, 2924.11,
2920.5, 2923.4–2923.7, 2924, 2924.9–2924.12, 2924.15, 2924.17–
2924.20).
We independently review the sustaining of a demurrer and
whether the complaint alleges facts sufficient to state a cause of
action or discloses a complete defense. (McCall v. PacifiCare of
5 Another entity that merged with Ocwen, PPH Mortgage
Corporation, filed the subject demurer although Ocwen remains the
only named defendant in the action.
5
Cal., Inc. (2001) 25 Cal.4th 412, 415.) We assume the truth of the
properly pleaded factual allegations, facts that reasonably can be
inferred from those expressly pleaded and matters of which judicial
notice has been taken. (Schifando v. City of Los Angeles (2003)
31 Cal.4th 1074, 1081.) We construe the pleading in a reasonable
manner and read the allegations in context. (Ibid.) We must affirm
the judgment if the sustaining of a general demurrer was proper on
any of the grounds stated in the demurrer, regardless of the trial
court’s stated reasons. (Aubry v. Tri-City Hospital Dist. (1992)
2 Cal.4th 962, 967.)
It is an abuse of discretion to sustain a demurrer without
leave to amend if there is a reasonable probability that the defect
can be cured by amendment. (Schifando v. City of Los Angeles,
supra, 31 Cal.4th at p. 1082.) The burden is on the plaintiff to
demonstrate how the complaint can be amended to state a valid
cause of action. (Ibid.) The plaintiff can make that showing for the
first time on appeal. (Careau & Co. v. Security Pacific Business
Credit, Inc. (1990) 222 Cal.App.3d 1371, 1386.)
As an initial matter, we note that Patricia’s counsel failed to
address the merits of Ocwen’s demurrers in the opening brief and
only identified potential causes of action in the reply.6 Although
our review of an order sustaining a demurrer without leave to
amend is de novo, our review is limited to issues which have been
adequately raised in an appellant’s briefs. (WA Southwest 2, LLC v.
First American Title Ins. Co. (2015) 240 Cal.App.4th 148, 155.)
6 Patricia’scounsel has exhibited a similar pattern of failing
to address the merits of Ocwen’s demurrers throughout this
litigation. He did not file an opposition to Ocwen’s first demurrer
and then failed to address the merits of the second demurrer in the
short opposition that was filed below.
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When a demurrer is sustained without leave to amend and
appellant fails to address specific causes of action, those causes of
action are deemed abandoned. (Ram v. OneWest Bank, FSB (2015)
234 Cal.App.4th 1, 9, fn. 2.) We therefore find that Patricia has
abandoned her unfair and deceptive trade practices, breach of
fiduciary duty, constructive fraud, and breach of implied-in-fact
contract causes of action. Accordingly, we address the remaining
causes of action for negligence, misrepresentation, and violation of
the HBOR that Patricia identified in her reply.
Although Patricia’s complaint and briefs are poorly drafted,
we conclude that she may be able to amend her complaint to state
causes of action. The gist of Patricia’s complaint is that Ocwen
negligently processed Patricia’s loan modification application and
misrepresented that the foreclosure sale date would be postponed so
long as the loan modification application was being processed,
causing the foreclosure of her home and eviction.
With respect to her negligence claim, Patricia alleges that
Ocwen had a duty to process Patricia’s loan modification requests in
a competent and timely fashion and that Ocwen breached that duty
by repeatedly providing her with information that was incorrect,
untimely, resulting in foreclosure of her property without any notice
to her. We disagree.
Generally, a financial institution owes no duty of care to a
borrower when the institution’s involvement in the loan transaction
does not exceed the scope of its conventional role as a mere lender of
money. (Nymark v. Heart Fed. Savings & Loan Assn. (1991)
231 Cal.App.3d 1089, 1095–1096.) A “loan modification is the
renegotiation of loan terms, which falls squarely within the scope of
a lending institution’s conventional role as a lender of money.”
(Lueras v. BAC Home Loans Servicing, LP (2013) 221 Cal.App.4th
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49, 67.) Nothing in Patricia’s complaint or briefing suggests that
she can allege that Ocwen’s involvement in processing her loan
modification application went beyond its conventional role as a loan
servicer, creating a general duty of care. Thus, her general
negligence claim fails.
However, while a lender does not owe a general duty of care
in processing a loan modification application, it does owe the
borrower a duty to not make “material misrepresentations about
the status of an application for a loan modification or about the
date, time, or status of a foreclosure sale.” (Lueras v. BAC Home
Loans Servicing, LP, supra, 221 Cal.App.4th at p. 68.) The
elements of a cause of action for intentional misrepresentation are
(1) a misrepresentation, (2) with knowledge of its falsity, (3) with
the intent to induce another’s reliance on the misrepresentation,
(4) actual and justifiable reliance, and (5) resulting damage.
(Chapman v. Skype Inc. (2013) 220 Cal.App.4th 217, 230–231.) The
elements of a claim for negligent misrepresentation are nearly
identical, except that instead of knowledge of the
misrepresentation’s falsity, a plaintiff need only show the absence
of reasonable grounds for believing the misrepresentation to be
true. (Bock v. Hansen (2014) 225 Cal.App.4th 215, 231.) Causes of
action for misrepresentation sound in fraud and each element must
be pled with specificity. (Chapman, at p. 231.) “The specificity
requirement means a plaintiff must allege facts showing how,
when, where, to whom, and by what means the representations
were made, and, in the case of a corporate defendant, the plaintiff
must allege the names of the persons who made the
representations, their authority to speak on behalf of the
corporation, to whom they spoke, what they said or wrote, and
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when the representation was made.” (West v. JPMorgan Chase
Bank, N.A. (2013) 214 Cal.App.4th 780, 793.)
Here, Patricia could potentially allege a misrepresentation
based on Ocwen’s reassurances that so long as Patricia’s loan
application were in process, the foreclosure sale would be
postponed. While Patricia’s complaint only identifies one Ocwen
representative by name, she can potentially amend her pleading to
include the names of those representatives to whom John spoke
during the processing of her application. Further, Patricia also
alleged that Ocwen representatives misled her that the February 8,
2017 foreclosure date had been postponed and that no foreclosure
date had been scheduled. It is also apparent that Patricia relied on
Ocwen’s statements that the foreclosure sale date would be
postponed so long as her loan modification application were in
process as she did not pursue any other remedies to avoid
foreclosure. Liberally construing the allegations in favor of
Patricia, we conclude that she may be able to state causes of action
for intentional or negligent misrepresentation against Ocwen and
should be granted leave to assert those claims.
We also conclude that Patricia may be able to amend her
complaint to allege a violation of the HBOR’s prohibition against
dual tracking. The HBOR was enacted “to ensure that, as part of
the nonjudicial foreclosure process, borrowers are considered for,
and have a meaningful opportunity to obtain, available loss
mitigation options, if any, offered by or through the borrower's
mortgage servicer, such as loan modifications or other alternatives
to foreclosure.” (Civ. Code, § 2923.4.) The HBOR prohibits dual
tracking, whereby financial institutions continue to pursue
foreclosure while evaluating a borrower’s loan modification
application. (Civ. Code, §§ 2923.6, 2924.18.) If a financial
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institution engages in this practice, the borrower may pursue an
action for damages and obtain attorney fees and costs. (Civ. Code,
§ 2924.12, subds. (b), (i); Valbuena v. Ocwen Loan Servicing, LLC
(2015) 237 Cal.App.4th 1267, 1272.)
Here, Patricia has alleged that she pursued a loan
modification with Ocwen and submitted documentation while
remaining in contact with Ocwen representatives. Nonetheless, her
home was foreclosed upon and sold while Ocwen purportedly was
considering her application. These allegations support the
conclusion that Patricia may be able to amend her complaint to
allege a violation of the HBOR.
DISPOSITION
The judgment is reversed. The trial court is directed to
(1) vacate its order sustaining Ocwen Loan Servicing, LLC’s
demurrer without leave to amend and (2) enter a new order
allowing Patricia Gould to file a second amended complaint to
allege causes of action for intentional and negligent
misrepresentation and violation of the Homeowner’s Bill of Rights.
The parties to bear their own costs on appeal.
NOT TO BE PUBLISHED.
DHANIDINA, J.
We concur:
LAVIN, Acting P. J. EGERTON, J.
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